Debt-service coverage ratio
(redirected from Debt-Service Coverage Ratios)Debt-service coverage ratio
Earnings before interest and income taxes, divided by interest expense plus the quantity of principal repayments divided by one minus the tax rate.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
Debt-Service Coverage Ratio
1. In investment real estate, the ratio of annual net operating income on a piece of investment property to its annual debt service. Banks use the DSCR to help determine whether to make or refinance loans for investment property. A DSCR equal to or greater than 1 indicates that the debtor is able to service the debt on the income from the investment property. In personal finance, banks usually require a DSCR of at least 1 to make such a loan, while they generally expect a ratio of 1.2 for commercial projects.
2. In government finance, the ratio of annual export earnings to its annual debt service on external debt.
2. In government finance, the ratio of annual export earnings to its annual debt service on external debt.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved